The Australian Government has announced that Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) will be renamed Giving Funds. This change is more than cosmetic; it signals a clear shift in the Government’s expectations about the purpose and culture of philanthropic structures in Australia.
Alongside the rename, the Government has also announced significant changes to minimum distribution rates, moving both fund types to a uniform 6% of net assets per year. This article covers both changes in detail, starting with the rename and what it means for trustees and families.
Why the Rename?
The Government’s view is straightforward: the existing names, ‘Private Ancillary Fund’ and ‘Public Ancillary Fund’, are technical, opaque, and fail to convey what these structures are actually for. The new name, Giving Fund, is designed to make that purpose explicit.
Ancillary funds have always been vehicles for charitable giving, but in practice, some have operated more as long-term investment vehicles with limited distributions. By renaming them Giving Funds, the Government is reinforcing that these structures exist to distribute money to eligible charities- not to accumulate capital indefinitely.
What Are Giving Funds?
A Private Giving Fund (formerly PAF) is a popular vehicle for family philanthropy in Australia. It allows donors to make tax-deductible contributions to a charitable trust that is controlled and managed by the family or a nominated board. The fund then distributes grants to endorsed deductible gift recipients, excluding other ancillary funds, in line with the family’s charitable objectives.
A Public Giving Fund (formerly PuAF) operates similarly, but raises donations from the broader community rather than a single family group.
Both structures are regulated by the Australian Charities and Not-for-Profits Commission (ACNC) and the Australian Taxation Office (ATO) and must comply with strict governance, reporting and distribution requirements.
The Broader Policy Context
These reforms respond directly to recommendations in the Productivity Commission’s Future Foundations for Giving report and the Not-for-Profit Sector Development Blueprint, both of which identified that ancillary funds were not always functioning as active giving vehicles. The rename is part of a broader strategy to increase the flow of philanthropic capital to charities across Australia and strengthen long-term charitable support.
Distribution Rate Changes: Moving to a Uniform 6% Minimum
The most significant reform is the introduction of a single minimum annual distribution rate of 6% of net assets, applying to both Private and Public Giving Funds.
The Current Rates
Currently, the minimum annual distribution requirements are:
- Private Ancillary Funds: 5% of net assets per year
- Public Ancillary Funds: 4% of net assets per year
The new 6 %uniform rate represents an increase for both fund types: a 20% rise for PAFs and a 50% rise for PuAFs. This is the most material change for existing fund trustees and advisers.
Why 6%?
The rationale is to increase the total quantum of funding flowing into the charity sector each year. By lifting and aligning the minimum distribution rate, the Government intends to encourage more active, regular grant-making rather than the slow accumulation of capital over decades.
For many philanthropic families, this change will require a review of investment strategies and cash flow planning. Private Giving Funds are often structured to preserve and grow capital so that giving can continue across generations. A higher mandatory distribution rate may influence portfolio allocation, expected returns and the size of annual grants.
Three-Year Distribution Smoothing: Flexibility to Balance Compliance and Strategy
To offset the impact of the higher distribution requirement, the Government will allow Giving Funds to smooth distributions over three years. Rather than meeting the full 6% minimum strictly in every financial year, funds can average their required distributions across three years.
What Does Smoothing Mean in Practice?
This measure is designed to:
- Support more strategic, multi-year grant-making
- Reduce the risk of forced asset sales in years of weaker investment performance
- Allow funds to support larger or longer-term charitable projects more flexibly
For example, a Giving Fund supporting a long-term medical research program or a major community infrastructure project can structure grants more flexibly without needing to draw down capital heavily in a single year.
Timing and Transition Period
The new 6% minimum distribution rate will apply from the first financial year after the Ancillary Fund Guidelines are formally amended.
Existing Giving Funds will benefit from a two-year transition period before the new rate becomes mandatory. This gives trustees time to:
Assess compliance obligations under the new framework
Review and update trust deeds and governing documents where necessary
Refine grant-making strategies and investment portfolios
Model the cash flow impact of higher distributions across different market return scenarios
What This Means for Trustees and Advisers
For families, trustees and advisers involved in Private or Public Giving Funds, these reforms signal a meaningful shift in how philanthropic capital will be managed and distributed in the years ahead. The changes create both compliance obligations and strategic opportunities.
Key areas to address include:
- Investment strategy review: Modelling the cash flow and investment impact of a 6% distribution rate across different market return scenarios
- Governing documents: Reviewing trust deeds to ensure they permit higher distributions and three-year averaging
- Grant strategy design: Designing grant strategies that use averaging effectively while still meeting annual compliance requirements
- Liquidity planning: Aligning distribution timing with investment performance and liquidity needs
- ACNC and ATO compliance: Documenting trustee decisions to meet regulator expectations
Strategic Advice Under the New Giving Fund Rules
The Giving Advisory supports families, boards and advisers in establishing and managing private giving funds. Our team guides governance, investment considerations, distribution strategy and regulatory compliance under the new 6% framework.
If you are reviewing your ancillary fund or considering setting up a giving fund, The Giving Advisory can help you align your structure with the new rules while preserving your long-term philanthropic vision.
Frequently Asked Questions
What is the difference between the old Ancillary Funds and the new Giving Funds?
There is no structural difference, the rename from Private Ancillary Fund (PAF) and Public Ancillary Fund (PuAF) to Private Giving Fund and Public Giving Fund is primarily about clarifying purpose. The Government wants the name to reflect that these structures exist to actively distribute money to eligible charities, not to accumulate capital indefinitely.
What is the new minimum distribution rate and when does it take effect?
Both Private and Public Giving Funds will be required to distribute a minimum of 6% of net assets per year, up from 5% for PAFs and 4% for PuAFs. The new rate will apply from the first financial year after the Ancillary Fund Guidelines are formally amended, with a two-year transition period for existing funds.
What is the three-year distribution smoothing rule and how does it work?
Rather than requiring funds to meet the full 6% minimum in every single financial year, the Government will allow Giving Funds to average their distributions across three years. This provides flexibility for strategic multi-year grant-making, reduces the risk of forced asset sales in weaker investment years, and allows funds to support larger or longer-term charitable projects more effectively.
What do trustees need to do to prepare for these changes?
Trustees should review their investment strategy and model the cash flow impact of the new 6% distribution rate, update trust deeds and governing documents where necessary, design grant strategies that make use of the three-year averaging provision, and ensure compliance with ACNC and ATO reporting requirements throughout the transition period.
Who do these changes apply to?
These changes apply to all existing and new Private and Public Giving Funds regulated by the Australian Charities and Not-for-Profits Commission (ACNC) and the Australian Taxation Office (ATO). Both families managing private giving funds and organisations operating public giving funds will need to review their structures and strategies in light of the new requirements.